the rise and fall of the welfare state

Asbjørn WahlAuthor

The Rise and Fall of the Welfare State

15 November 2012 Ryerson University, Toronto

The welfare state success

The welfare state represented great progress

in terms of living and working conditions,

unprecedented in the history of mankind.

Public health, life expectancy and

social security improved enormously as

the welfare state developed in the last century.


A question of social power

• In the last resort, welfare is a question of the distribution of the wealth in society

• The distribution of the wealth in societyis a question of economic and social power

• Control and ownership of capital / resources form the basis of social power


The three foundation pillars

The social helpstat

Struggle of organised

labour

System competition


The welfare economy

• A considerable shift in the balance of power

• The post WWII politics of Bretton Woods

• Capital control and market interventions

• Market competition was dampened

• Compensated the deficiencies of the market

• Social insurance, public services, utilities


Result of social struggle

Well-developed welfare states

were the result of social struggles –

struggles based on popular mobilisation,

confrontations with the counter forces,

and the fact that a great part of the economy

was taken out of the market

and made subject to democratic governance.


The class compromise

• Compromise between labour and capital

• The result of a shift in power relations

• A long-term booming capitalism

• Result: great progress, and depolitisation

• The crisis-free capitalism was a «reality»

• The role of the social democratic parties


Regulation of capital

Fixed exchange ratesCapital control

Regulation ofinvestments

Trade protectionism

Labour legislation Huge public sector

Private capital


A specific power relation

• The welfare state is not only a sum of social institutions and public budgets, but first and foremost the result of certain power relations in society

• The welfare state was never planned, it was a compromise of interests in a specific historic situation


The turning point

• The 1970s: crisis in the world economy

• The breakdown of the social pact

• The triumph of neoliberalism

• The abolishment of capital control

• Deregulation of the markets

• Immense shift in the balance of power


The neoliberal offensive



Trade protectionism


Private capital



Capital control


Trade protectionism


Private capital




Trade protectionism


Private capital




Private capital



Labour legislation

Private capital


Reduced public sector

The current situation

Private capital


Reduced public sectorAttacks on labour legislation

Effects of the offensive

• Increased pressure from competition – at the workplace, in school, in society

• Redistribution from public to private

• Redistribution from labour to capital

• Redistribution from the poor to the rich

• Undermining of public welfare institutions

• De-democratisation - increased market power


«Public sector has become too big»

• It has become too big in all countries, no matter the size of the public sector

• It has actually become most too big where it from the outset was smallest (i.e. the USA)

• The myth of the too big public sector is being used ideologically to weaken it

• The power-relations in society and the political-ideological hegemony decides how much we decide to organise in common

Ryerson University, Toronto15 November 2012

Reduced wage shareLohnquoten in der EU15, in Deutschland, den USA und Japan, 1975-

2006

62

64

66

68

70

72

74

76

78

80

82

19

75

76

77

78

79

19

80

81

82

83

84

19

85

86

87

88

89

19

90

91

92

93

94

19

95

96

97

98

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

in %

der

BIP

zu

Fak

tork

ost

en

EU-15 USA Japan Deutschland75Quellen: European Economy , 6/2002 und 6/2006, jew eils Statistical annex, table 32


Contemporary capitalism

• Capitalism is in a deep systemic crisis

• Politicians across the board has responded by deregulating markets /abolishing capital control

• A neo-liberal strategy of global restructuring

• Institutionalisation of neo-liberalism in the EU

• No more room for compromises with labour

• A new phase in the development of capitalism


From financial to debt crisis

• Gigantic rescue packages saved the economic system from the financial crisis

• The financial crisis turned into a debt crisis

• Strong demands for balanced budgets

• Trade unions and public welfare under attack

• On a straight course towards a depression

• From economic to social and political crisis


Draconian austerity policies

• Wages in the public sector have been cut without negotiations in at least ten EU countries

• Considerable down-sizing in the public sector

• Massive attacks on pensions and social security

• Forced privatisation of whatever is left of public property, pushed by the Troika

• In other words, a massacre of the welfare state is going on in the most crisis-ridden countries


The future of the welfare state?

The social helpstat


labour

System competition


?

The future of the welfare state?

The social helpstat


labour


Financial, economic

crisis

?

What went wrong?

• The social pact was not a stable situation

• A compromise in a concrete historical situation

• Tactical compromise became the final aim

• Basic power relations remained in tact

• The ideology of the social pact proved wrong

• Taken by surprise by the neo-liberal offensive


This was just not enough !



Trade protectionism


Private capital


Labour movement in crisis

• Deep political-ideological crisis on the left

• System criticism is more or less non-existent

• No attempt at mobilising for a power struggle

• Almost no measures are put in place in order to weaken the power of financial capital in society

• The crisis reinterpreted as public irresponsibility

• A lack of trust, since they have supported/ carried out the policy which led to the crisis


New economic governance

• The Annual Growth Survey (AGS)

• The European ’Semester’ (budget control)

• New economic governance (’sixpack’)

• Euro-/Financial pact (Euro countries + others)

• A new system of economic sanctions

• Austerity policies are turned into a matter of principle, and Keynesianism is banned by law


Economic growth not the aim

• Many criticise the austerity policies in Europe for failing to counteract the effects of the crisis

• But the aim of the austerity policies is not to regain economic growth and create jobs

• It is implemented in order to destroy the welfare state and defeat trade unions

• The elite uses the crisis as an opportunity to carry out what they did not achieve with the Lisbon strategy, now with shock-therapy


Important challenges ahead

• The class compromise is breaking down – the social partnership ideology is doomed to fall

• Negative and partly catastrophic experiences with social democratic / centre left governments

• Greece, Spain, Portugal

• France, Italy, Norway and Denmark

• The EU moves in an authoritarian direction without it being noticed by the broad left


Beyond Keynesianism !

• Emancipatory social policies presuppose

a shift in the balance of power in society

• The welfare state did not go far enough in

taking democratic control of the economy

• A new needs-based social model will have

to go beyond the Keynesian welfare state


Light at the end of the tunnel?

• Under current conditions we are facing the end of the era of the welfare state

• The task now is not to “save the welfare state”, but to defend the achievements which were won

• Our future will depend on the development of the social struggle – the balance of power in society

• A higher level of civilisation is still possible, but only through mobilisation of broad social forces



The Rise and Fall of the Welfare State

In an age of government imposed austerity, and after 30 years of neo-liberal restructuring, the future of the welfare state looks increasingly uncertain. Asbjørn Wahl offers an accessible analysis of the situation across Europe, identifies the most important challenges and presents practical proposals for combating the assaults on welfare.

$ 25,-

the rise and fall of the welfare state

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capital redistribution

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